Assessing Sustainable Development Impacts of Investment Incentives

This guide provides a comprehensive checklist for governments and stakeholders to evaluate the sustainable development impacts of investment incentives. It emphasizes a multi-level analysis covering individual projects, general incentive policy design, and the influence of international agreements, arguing that economic growth alone is an insufficient measure of success.

• Evaluating investment incentives requires a multi-level analysis across three distinct areas: individual projects, general incentive policy, and the implications of international agreements. Sustainable development in this context is defined as the sustainability of economic, social, and environmental consequences, moving beyond simple economic development.
• There is a significant gap between the gross number of jobs reported by subsidized projects and the actual jobs created. Research from the United States indicates that less than 10% of apparent jobs were truly the result of the incentive, and new job creation in one area is often offset by job losses at other facilities of the same company or by competitors.
• Investment incentives can negatively impact environmental sustainability if they are granted to heavily polluting firms or include 'regulatory incentives' that exempt investors from existing environmental or labour regulations.
• Subnational competition for investment often leads to 'bidding wars' that reduce the overall benefits a country receives. While Canada has reduced this competition by prohibiting cities from offering incentives in almost all ten provinces, developing countries like Brazil, China, and India have seen an increase in such wars due to decentralization.
• Transparency in the subsidy process is critical to prevent corporate rent-seeking, bribery, and corruption. The guide recommends publishing total spending on incentives and specific deal information, preferably on the internet, to ensure accountability.
• Ex post assessments are essential for determining program efficiency. For example, Vietnam discovered through investor surveys that corporate tax incentives were unnecessary for attracting investment in extractive industries because government royalties were already very low, leading to a 2008 proposal to increase royalty rates.
• International agreements, such as bilateral investment treaties (BITs), free-trade agreements (FTAs), and the WTO Agreement on Trade-Related Investment Measures (TRIMS), can restrict a host government's ability to impose performance requirements on investors, potentially limiting the sustainable development benefits of an investment.

APA

Thomas, K. P. (2009). Assessing Sustainable Development Impacts of Investment Incentives. International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/assessing_sd_investment.pdf

Chicago

Thomas, Kenneth P. Assessing Sustainable Development Impacts of Investment Incentives. International Institute for Sustainable Development, 2009. https://www.iisd.org/system/files/publications/assessing_sd_investment.pdf.

Wikipedia

{{cite report |last1=Thomas |first1=Kenneth P. |title=Assessing Sustainable Development Impacts of Investment Incentives |publisher=International Institute for Sustainable Development |date=2009 |url=https://www.iisd.org/system/files/publications/assessing_sd_investment.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{thomas2009assessing, author = {Thomas, Kenneth P.}, title = {{Assessing Sustainable Development Impacts of Investment Incentives}}, institution = {International Institute for Sustainable Development}, year = {2009}, url = {https://www.iisd.org/system/files/publications/assessing_sd_investment.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }